New Zealand had achieved one of the higher annual
economic growth rates among the OECD countries, despite the
worst drought in 70 years, Finance Minister Bill English said
The drought earlier this year slowed economic growth in the
June quarter, Statistics New Zealand figures showing gross
domestic product (GDP) grew 0.2% in the three months to June,
right on market forecast. The Reserve Bank had expectations
of 0.4% growth.
The annual June growth rate was 2.5% and the average annual
change was 2.7%.
Mr English said New Zealand's annual growth of 2.5% compared
well with 2.6% in Australia, 1.6% in the United States, 1.4%
in Canada, 1.3% in Japan, 1.5% in the United Kingdom and
-0.5% in the euro area.
''While the June quarter was affected by a fall in
agricultural production, down 6.4%, growing conditions since
then have been good, business and consumer confidence have
been high and the Canterbury rebuild continues apace.''
Those factors pointed towards relatively strong growth
resuming in the September quarter, he said.
ASB economist Christina Leung estimated the effects of the
drought to have been about 0.5%, slightly higher than
expectations of a 0.4% drop in contribution.
That reflected a larger-than-expected fall in agricultural
activity as a result of reduced milk production.
More recent milk production data pointed to a ''reasonably
strong'' recovery in milk production in the three months
ended September, given the earlier start to calving.
Beyond the effects of the drought, underlying growth appeared
to be gaining momentum, she said.
Strong housing market and construction activity was reflected
in stronger than expected growth in real estate services and
construction sectors, construction activity in the quarter
having been boosted by strong growth in infrastructure
spending and roading.
Also, there were signs the effects of the stronger housing
market and construction activity were flowing through to
other sectors, Ms Leung said.
''In particular, there was further strong growth in
professional services in the quarter, with the 2.6% increase
building on the 3.9% increase in the previous quarter.
''Statistics NZ notes this growth was driven by an increase
in architectural and engineering services, which was not
region-specific. This suggests construction growth is
broadening beyond the earthquake rebuild in Canterbury,'' Ms
ANZ chief economist Mark Smith said the scene was set for a
stronger second half of the year.
The strengthening labour market, rising net immigration and
the housing market were expected to underpin increased
The mild winter was expected to lift dairy production and
export activity, and the $40 billion Canterbury rebuild and
lift in construction sector activity elsewhere were expected
to filter through into wider economic activity.
''After allowing for drought impacts, it is clear base
momentum is lifting, which is consistent with the spirit of
the September monetary policy statement.''
GDP was still 1.1% below its peak in 2007. With indicators
pointing ''firmly up'' for the second half of the year, the
gap should rapidly close, Mr Smith said.
Council of Trade Unions economist Bill Rosenberg said it was
good to see economic growth remaining positive despite the
drought, but job growth was needed to reduce unemployment and
With forecasts showing the unemployment rate not dropping
below 6% this year, the 153,000 unemployed and 245,000
jobless meant a recovery was not a recovery unless it helped
the people who needed it most, he said.
''We need more jobs with strongly rising wages that ensure
wage and salary earners share in the growth.''
Mr English warned of risks and challenges remaining in the
global economy, especially for New Zealand's trading